ECONOMY by VIVEK SINGH

2021-07-29 07:00:59 Open / Comment

2021-07-29 06:44:49 Based on todays article of Indian Express (https://indianexpress.com/article/explained/explained-pre-packaged-insolvency-resolution-process-of-msmes-7426810/) and the July 27th Article explained on the channel.....Let me summarize the differences between the normal Corporate Insolvency Resolution Process (CIRP) and Pre-Packaged Insolvency Resolution Process (PIRP). Open / Comment

2021-07-27 07:25:58 The above news is from Indian Express. Let me explain it....please read it carefully:

1) Last year the IBC 2016 was amended wherein the default limit was increased to Rs. 1 crore (from Rs. 1 lakh earlier) for IBC 2016 to be applicable.

2) For normal defaults above Rs. 1 crore, the IBC process is initiated and "Resolution Applicants" submit the BID to purchase a bankrupt company (Debtor). These Resolution Applicants are basically other companies operating in the business in that sector in which Debtor was functioning. If the owners of Debtor company are not "wilful defaulter" and meet certain conditions then the owners of the Debtor company are also allowed to participate in the bid process with the Resolution Applicants to purchase their own company again (may be at throw away prices). But during this "Corporate Insolvency Resolution Process (CIRP)" the management of the the Debtor company is passed on to "Resolution Professionals" so that the owners of the Debtor company cannot manipulate its finances and siphon of funds from the books of Debtor (company).

But in case of "Pre-Packaged Insolvency Resolution Process (PIRP), during the PIRP, the management of the company will remain with the owners of the Debtor (MSME company). AND no other "Resolution Applicant" will be allowed to submit the Bid/plan for resolution of the defaulted MSME company (advantage for MSME owners) OTHER than the owners of the MSME company (debtor) but it should be approved by 2/3 of the creditors by value.

But in case the "Operational Creditors" have not been paid their total dues (which means the PIRP is basically about resolution of the debt of financial creditors) then OTHER "Resolution Applicants" will also be allowed to participate in the Bid to takeover the MSME company (debtor). But the owners of the MSME company will still be asked to match the BID of the other applicants (Swiss Challenge) and if they match then the MSME company (debtor) will remain with its (present) owners. And if the MSME owners are not able to match the BID of other applicants then the MSME company (debtor) will go in the hands of the new owners and the previous owners will loose their MSME company/Investments done in the MSME.

3) In normal IBC, the Debtor/Creditor approach the NCLT and then NCLT appoints resolution professionals and then the resolution process starts and advertisement is made for who is interested in the defaulted company etc... which takes time and effort of NCLT. But in PIRP... the owners of the defaulted company (MSME) will prepare a resolution plan on their own and initiate the PIRP. So it will relieve the burden on NCLT.

4) PIRP is applicable if an MSME has taken loan and the default is of less than Rs. 1 crore. Open / Comment

2021-07-27 06:48:30 Open / Comment

2021-07-27 06:31:08 Swiss Challenge: This term can be used in any sector generally in case of bidding. Let me explain it as it will be used to understand todays news on "Pre-Pack Resolution of MSMEs":

Suppose Govt wants to build Railway platforms by the private sector. So Govt. will finalize a business/financial model on which the private sector will be building and operating and maintaining the railway platform. But let us say Govt. is not very sure that which model will be good for the country's railway platforms. So, it asked private parties to submit/suggest different business models for the modernization of railway platform. Suppose 10 companies submitted the model and Govt selected one of the business model (let us say submitted by company XYZ based on their viability or Govt. thinks that, that could be the best model) for modernizing the platform. Now, ALL THE COMPANIES will be asked to submit their BIDS based on that business model/plan which has been finalized by the Govt. (and which was submitted by XYZ).

So, there will be ONE PARAMETER (let us say lowest cost, or highest profit sharing or revenue sharing to govt. or any other parameter) based on which all companies will submit the bid. If the company XYZ bid is the highest or lowest (depending on which parameter bidding is happening) then that company XYZ will be selected to do the project on the business model/plan which was submitted by the company XYZ.

But suppose some other company quoted the highest or lowest BID then in that case again company XYZ will be asked (given a chance) that can XYZ do the project at the price/bid submitted by the lowest/highest bidder. If company XYZ agrees then XYZ will get the project. And if company XYZ did not agree to work on the highest/lowest quote/bid/rate submitted by the other company then the OTHER company will be allowed to do the project at their quote/bid.

So, basically the company whose plan is the best and selected by the Govt., is given a chance in the bid process to match the highest/lowest bid and they get the preference to do that project. This is called "Swiss Challenge".

Operational Creditors: If IOCL has sold (Air Turbine) Fuel to Jet Airways and Jet Airways has not yet paid the money then IOCL is called the Operational Creditors. If Jet Airways has taken loan from Axis Bank then Axis Bank is the Financial Creditor. Open / Comment

2021-07-25 07:41:00 The above is article from Hindu regarding the recent judgements by Supreme Court on Cooperatives. I am just providing you here the updates, so that you do not get confused and you may ignore reading the entire article.

[As you all know that "cooperative societies" fall under State List but if a cooperative society is functioning in many/multiple states then it is governed by the Central Law "Multi State Cooperative Societies Act 2002" https://t.me/VivekSingh_Economy/3070.]

United Progressive Alliance (UPA) government had done Constitutional amendment (97th) to provide a reformist framework for the functioning of cooperatives. But Supreme court few days back struck down some amendments and some amendments it has passed/allowed. This has nothing to do with the recent creation of "Ministry of Cooperatives". But it has definitely raised questions on what policies Centre can lay down in future for the functioning of cooperative societies.

FIRST: UPA Govt. had introduced an amendment for all the cooperatives i.e. single state (governed by respective States) and multi-state (governed by Centre).... "maximum of 21 directors in a society, a fixed term of five years for elected members, a six-month cap on the time limit for which a society’s board of directors can be kept under supersession or suspension, and reservation of one seat for the Scheduled Castes or the Scheduled Tribes, and two seats for women on the board of every cooperative society, that is, every society that has members from these sections." —-> SC has struck down these provisions for Single State Cooperatives but it will SURVIVE for Multi State Cooperatives. If Centre wants to make these applicable for Single State Cooperatives then it should be passed by 2/3 majority in parliament and by 50% of State legislatures

SECOND: Under Article 19(1)(c) of the Constitution (fundamental rights)........... Earlier the line said "1. All citizens shall have the right ... (c) to form associations or unions" NOW as per the amendment it may change to"1. All citizens shall have the right ... (c) to form associations or unions or cooperative societies" —->THIS WILL SURVIVE

THIRD: The amendment added ‘Directive Principle’ through Article 43B, which says: “The State shall endeavour to promote voluntary formation, autonomous functioning, democratic control and professional management of cooperative societies.” —->THIS WILL SURVIVE Open / Comment

2021-07-25 07:20:00 Open / Comment

2021-07-24 08:32:04 The above is news from Indian Express. The following are some relevant points:

Considering the importance of availability of labour force data at more frequent time intervals, National Statistical Office (NSO) launched Periodic Labour Force Survey (PLFS) in April 2017. There are primarily two objectives of PLFS:

(i) To estimate the key employment and unemployment indicators (viz. Worker Population Ratio, Labour Force Participation Rate, Unemployment Rate) in the short time interval of three months for the urban areas only

(ii) To estimate employment and unemployment indicators in both rural and urban areas annually.

The first Annual Report (July 2017- June 2018) covering both rural and urban areas giving estimates of all important parameters of employment and unemployment was released in May 2019.

This is the third Annual Report for the period July 2019 - June 2020 on PLFS released yesterday by NSO. Ans as per the report following are the highlights:

Unemployment Rate = 4.8%
Labour Force Participation Rate (LFPR) = 40.1%
Worker Population Ratio = 38.2%

Unemployment Rate (UR) is defined as the percentage of persons unemployed among the persons in the labour force. (i.e. unemployed/Labour Force)

Worker Population Ratio (WPR) is defined as the percentage of employed persons in the population. (i.e. employed/Population)

Labour Force Participation Rate (LFPR) is defined as the percentage of population in the labour force. (i.e. labour force/Population)

Point to be Noted: NSO in its annual report has provided these above definitions. So, the Labour Force Participation Rate (LFPR) definition is also as per the NSO report. BUT International Labour Organization (ILO) provides a different definition for LFPR which is "Labour Force/ Working Age Population". And this is a major difference.

From your exam point of view please use the NSO definition. I have provided ILO definition in my book but that I will also modify.... because for UPSC exam we should follow our country standards. Open / Comment

2021-07-24 08:16:20 Open / Comment

2021-07-23 09:12:46 Pdf of the above article Open / Comment